The euro is one of the currencies widely known by the public as the single currency of the European Union. In the forex world, the EUR / USD pair is one of the currency pairs with the highest volume of transactions and the most often discussed by analysts and traders, both beginner and professional traders. Even called, transactions from this currency pair accounted for more than 50% of forex transactions.
Euro itself is also the highest weighted currency in the USD Index (USDX, DXY). More than 50% of the weight of the USD Index comes from this currency and its influence in the USD Index has a strong dominance. In fact, even in the USD index published by other institutions, the Euro still has the biggest share in driving the index value. No wonder, because the European Union, including the largest trading partner of the United States.
So, what are the concerns in currency trading?
1. Internal Factors
Internal factors include data and economic development from the European Union. There are various kinds of data that can be seen, but it should focus on GDP, inflation, unemployment and interest rates in this economic zone. This internal factor is also a reference for the ECB, the European Central Bank to conduct monetary actions, such as raising, lowering or maintaining interest rates.
2. External Factors
External factors are more difficult, especially for currency pairs like the Euro which has many trading partners and is also the No. 2 most liquid currency in the world. In the case of EUR / USD, it is not only factors from the United States that need to be watched out but also from around the world. Because the EUR / USD currency pair is the pair with the highest level of trading transactions on the forex market. So, whether in a stable situation or not, EUR / USD will be the benchmark for world currency trading. No wonder, because the Euro itself has a weight of 57% in USDX aka USD Index.
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EUR / USD trading
EUR / USD trading can be done by anyone, even beginners who are new to forex are advised to trade EUR / USD first. Why? Because this currency pair is the most liquid, it is unlikely that sudden and large movements will occur. In addition, brokers generally will provide a small spread for this currency pair. In fact, brokers with floating spreads can provide spreads up to 0 and without commissions.
EUR / USD itself in recent years has a low daily range, less than 60 pips, making it suitable for traders who are just learning. By trading on this currency pair, it is hoped that traders can more freely set trading strategies and techniques, before continuing to explore other currency pairs.
Data Releases from European Countries
What needs to be considered in EUR / USD trading?
- Not all news from Europe needs to be considered in forex trading in this currency pair. Usually, releases from major countries such as Germany and France have more weight on the movements of these currency pairs. Be sure to pay attention to releases from these two countries.
- As already stated, the European central bank aka ECB has the authority to regulate interest rates. Check the date the ECB meets and announces their policies, to avoid the wild movements of EUR / USD.
- Most brokers give a small spread on this currency, which can be a profit and loss. Profits, because profits can be obtained faster not to wait for prices to move beyond the spread value. Losses, due to the ease of price changes, there can be an intention to overtrade by opening lots of new orders. Be aware of this.
- Because the pair is USD, news from Ameirka United also needs to be considered in making decisions before trading is executed.
- On several occasions, even news that is not from Europe or the United States can sometimes move this currency pair. Risk On and Risk Off factors (sentiment of market participants whether they feel optimistic or pessimistic) can also be a driver of this currency pair.
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It should be underlined that the trading system on this currency pair does not provide certainty of always profitable and successful. Therefore the loss limit must remain and be installed at every time an entry is carried out in the form of Stop Loss. Keep in mind that if you use indicators, indicators are only tools to see what is likely to happen, not tools to see the future that will happen.
Always obey the rules when making transactions, because most traders make the mistake of breaking the rules they made themselves. This rule includes not opening new positions if the existing ones are not yet regarding SL or TP. Do not get carried away quickly when experiencing losses or when making a profit. Keep doing the analysis properly and the mind that is focused on achieving consistent profitable forex trading techniques.